The Thin Green Line: The Money Secrets of the Super Wealthy

243 Pages·2015·1.26 MB·English

by  Paul Sullivan

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Title Page Image
| CONTENTS
| Prologue: Lunching with Wealthy People
| THINK ABOUT IT
| 1. The Overlooked Simplicity of Buckets
| SAVE IT
| 2. Checking Stock Quotes Is Hazardous to Your Wealth
| 3. Debt and the Bordeaux Dilemma
| 4. The Futility of Fretting about Taxes
| SPEND IT
| 5. Spending Tips from People Who Spend a Lot but Aren’t Broke
| 6. The Education Race: Where the Wealthy Spend and Why It Matters
| GIVE IT AWAY
| 7. The Entitlement Conundrum: What Really Ruins Kids
| 8. How Did Giving Money Away Become Difficult?
| THINK ABOUT IT AGAIN
| 9. Money Causes Stress for Everyone
| Epilogue: It’s Better to Be Wealthy Than Rich, Even If You’re Poor
| Acknowledgments
| About the Author
| Notes
| Index
To my girls,
Laura, Virginia, and Phoebe
PROLOGUE
| LUNCHING WITH WEALTHY
PEOPLE
O
n a crisp spring morning, I sat in an exquisitely refurbished town
house a block from New York’s Metropolitan Museum of Art. I was listening to
four men worth tens of millions of dollars argue over who had the poorest
childhood.
With servers laying out a multicourse lunch in an opulent drawing room, the
men tried to outhumble each other. Allen Wolpert, a former consultant at Arthur
Andersen and then Accenture, boasted that he grew up in the Brighton Beach
section of Brooklyn and it was rough. His face had a fleshiness often associated
with men who have risen from nothing to great wealth, but his voice still carried
the borough’s distinctive, nasally accent. “What block?” shouted Tommy
Gallagher, who started on Wall Street right out of high school because he could
not get into college. When he heard the answer, he nodded: Wolpert was the real
deal. Gallagher may have been wealthy, but he was Brooklyn through and
through. He rose to become the vice chairman of CIBC World Markets when it
was a high-flying financial firm. He lived on tony East Seventy-Fifth Street in
Manhattan and had a beach house in the Hamptons, the summer retreat for
Manhattan’s wealthiest. But that day he was dressed in a blue T-shirt underneath
an old, green oxford. The combination made him look more like a neighborhood
bartender or a washed-up boxer than a decamillionaire. Between them sat Steve
L., a proprietary trader in Greenwich, Connecticut. He wanted in on this game.
“We had no money,” he said, shaking his well-groomed head for emphasis. “I
mean, no money. Nothing.” When pressed by the other men, Steve L. said his
father had been a professor in northern Virginia—a euphemism for the
University of Virginia. A college campus was never going to be the mean streets
of Brooklyn. He was out.
But then the quiet guy sitting next to me piped up. Steven, a short, soft man in
his late fifties who would go unnoticed on a city street, said he had grown up in
the Bronx, with a cabbie as a father. Not only did they have no money, but if it
hadn’t been for a lucky break his father got, he wouldn’t be here today. “One of
his fares got me into Dartmouth,” he said. The group was impressed. He had
gone from nothing to beyond the others and had the fortune to prove it. Steven
told me he had owned residential real estate in East Harlem but had sold his
company in March 2007 at the height of the property bubble. The timing of the
sale sounded fortuitous to me, but it didn’t raise any red flags. People who
invested in real estate could grow exceedingly rich just as quickly as they could
lose everything. He had gotten lucky on the timing of his sale, perhaps, but
surely he had put a lot of effort into his business. That day, he easily won the
humble game. What Steven had left out was that he had once been known as one
of the worst slumlords in New York City—a distinction that netted him $225
million for his company.
I listened to these men with a sense of bemusement and fascination. They
were all in their fifties, but they had been trying to outdo each other like
teenagers. They had succeeded in their professions but could not stop competing.
I may not have wanted to have dinner or even a drink with any of them, but I
admired what they had done: made themselves financially secure for life through
their own work. Their success was appealing to me. It was 2011 and the
economic recovery in the United States was weak. I had come to believe that the
economy was changing, and that the burden of security in life and retirement
was going to fall squarely on each of us. I believed that making money was
getting harder, and holding on to it harder still.
These four men were members of Tiger 21, an investment group with some
two hundred members in the United States and Canada. To join the group, each
man needed at least $10 million and a willingness to pay an annual membership
fee of $30,000. In return they met one day every month to talk about their
investments, though just as often they discussed their feelings in one of the few
groups in the world where they would not be judged as ungrateful rich guys.
They were all rich guys, grateful or not. As one of them, Leslie Quick III, son of
the founder of the Quick & Reilly discount brokerage, told me, “Where can I
talk about my problems and other people won’t say, ‘You’ve got a lot of money,
bitch, bitch, bitch’? I do have a lot of money, but I still have problems. Sure,
they’re high-class problems, but they’re still problems.”
I was there with about a dozen members in my role as the Wealth Matters
columnist for the New York Times. They were going to examine the investment
decisions my wife and I had made the way they examined their own choices. I
thought this exercise might make an interesting column. While the monthly
Tiger 21 sessions featured updates on the world economy, investment tips,
speakers, and a nice lunch—a buffalo-mozzarella-and-tomato salad, poached
salmon, and sautéed asparagus; a crisp chardonnay served all around—the
signature moment was the Portfolio Defense, whereby one member opens up his
investments to the brutal scrutiny of the eleven other people in the group. He
must tell the truth and then listen while everything is critiqued. It’s tough love.
They had promised to analyze the financial decisions my wife and I had made
just as they did those of each member. By their standards, the investments we
had were insignificant and simple. But personally I wanted to know how my
wife and I had thought about our financial lives. I was pretty confident. I thought
everything would go well.
The choice of art on the walls—photos of Chinese Communist meeting halls
in decay—should have been my clue that this analysis was going to be torturous.
The members took turns eviscerating our financial planning. I felt like the sole
mole on a Whac-A-Mole board: when one old man’s arm got tired, he passed the
mallet to another and so on and so on. They weren’t mocking our investments—
these were men who had tens of millions of dollars on up to Quick, whose
family had sold Quick & Reilly for $1.6 billion in 1997. They were tearing us
apart for simpler things: our expenses, our insurance, our view of the future
being like the present but with additional children. They were attacking us for
errors that we had made, but that I was sure other people had made as well. Had
we saved all we could? Had we indulged in luxuries that we could pay for but
couldn’t really afford? Had we planned how we were going to pay for our life if
something went wrong? Our income was high, but how long could we replace it
if one or both of us lost our jobs or if illness ended our careers? Risk was the
word I heard over and over. Their judgments of the life we had built, with care
and foresight, terrified me.
“Your goal does not match your current reality,” said Steve L, the trader.
“You’re not on a trajectory to get to point B from point A. I’m too short for my
weight, but you’re spending too much money right now.”
He thought our plan to make the same amount of money in the future as we
were making now—not more—was unrealistic. The businesses we were in—
journalism and recruiting—were changing. And even if our incomes stayed
steady, we had no idea what additional children would cost, particularly if we
planned to send them to private school and save enough to pay for college.
Wolpert, a father of two grown children, chimed in with the consultant’s long
view: “You’re living very comfortably, but this kids thing, it’s going to rock
your financial stability for the next twenty years while you get the kids through
college. The comfort that you have today—ten years from now you may feel
yourself being stretched unless your income and your wife’s income grow to just
accommodate.”
Gallagher was adamant that we needed to sell our condo in Florida, a luxury,